TY - JOUR
T1 - Easing the squeeze
T2 - How do acquisitions relieve target firms’ financial constraints?
AU - El Ghoul, Sadok
AU - Gong, Zhaoran (Jason)
AU - Guedhami, Omrane
N1 - Publisher Copyright:
© 2024 The Authors
PY - 2025/2
Y1 - 2025/2
N2 - Using private firm financial data, we investigate how acquisitions alleviate financial constraints in private firms. We find that targets’ internal financing improves after acquisitions because they can retain higher proportions of earnings and borrow interest-free capital from their parent companies. Targets also receive better external financing as they obtain more debt financing with lower interest rates, borrow more trade credit from suppliers, and collect receivables from customers more quickly. Our findings suggest that internal and external financing improvements contribute to reducing targets’ financial constraints.
AB - Using private firm financial data, we investigate how acquisitions alleviate financial constraints in private firms. We find that targets’ internal financing improves after acquisitions because they can retain higher proportions of earnings and borrow interest-free capital from their parent companies. Targets also receive better external financing as they obtain more debt financing with lower interest rates, borrow more trade credit from suppliers, and collect receivables from customers more quickly. Our findings suggest that internal and external financing improvements contribute to reducing targets’ financial constraints.
KW - Debt financing
KW - Financial constraints
KW - Intra-group borrowing
KW - Mergers and acquisitions
KW - Payout policy
UR - http://www.scopus.com/inward/record.url?scp=85212557406&partnerID=8YFLogxK
U2 - 10.1016/j.ribaf.2024.102673
DO - 10.1016/j.ribaf.2024.102673
M3 - Article
AN - SCOPUS:85212557406
SN - 0275-5319
VL - 74
JO - Research in International Business and Finance
JF - Research in International Business and Finance
M1 - 102673
ER -